Apartment supply in Hanoi to surge in H2 meeting higher demand: Savills

July 25, 2020 | 09:48
The apartment supply in Hanoi is expected to surge in the second half of this year to meet higher demand in this segment, according to Savills Vietnam.
apartment supply in hanoi to surge in h2 meeting higher demand savills
In the second half of this year, about 24,200 units from four existing, and 18 future projects will enter Hanoi's market.- Photo zing news

In the second half of this year, about 24,200 units from four existing, and 18 future projects, will enter the market, with Grade B continuing to lead segment share. Do Thu Hang, Director, Advisory Services, Savills Hanoi, made the statement at Savills Vietnam's press conference on a report on Hanoi's property market in the first half of this year, held on July 21.

Of the 22 projects announced, 68 per cent are under construction with 32 per cent at the foundation level. Leading future suppliers are To Liem district with 45 per cent of stock, Gia Lam with 32 per cent and Hoang Mai with 9 per cent.

"Grade B remains the driver, however, all classes have suffered short term demand pressure. Large supply handed over in 2020 may see rental yields soften. With abundant infrastructure being completed, long term returns remain sound," said Hang.

However, urbanisation, strong population growth and shrinking households all contribute to residential property demand, she said.

In 2020, Vietnam's urbanisation was 37 per cent lower than Southeast Asia (50 per cent) and Asian peers (51 per cent). Lagging urbanisation implies strong future development potential.

A 96-million population in 2019 is expected to surge to 120 million by 2050 with a national urbanisation rate at 57 per cent. The emerging middle class, currently accounting for 13 per cent, is expected to reach 26 per cent of the population by 2026, according to Savills.

Total households increased 1.8 per cent per annum from 2009-19. Of which, each household had an average of 3.5 persons, 0.3 persons fewer than in 2009.

In line with Hanoi's urban expansion, supply is shifting from urban areas to rural districts. In 2016, Hoai Duc and Thanh Tri districts provided 10 per cent of supply. In the second quarter of this year, Gia Lam, Dong Anh, Hoai Duc and Thanh Tri districts together provided a 27 per cent share. Strongly performing Eastern districts in the first half of this year made suburban district sales account for 22 per cent.

Those districts have future large satellite projects, including Xuan Mai Smart City (3,072 ha), Vinhomes Co Loa (299 ha), BRG Smart City (272 ha) and Vinhomes Wonder Park (133 ha). These developments were expected to deliver sustainable solutions to population pressure, traffic congestion and infrastructure shortages.

This Savills quarterly report also said the lockdown lasting just 22 days helped ease downward pressure. In the second quarter of this year, five new and the next phases of seven existing projects provided about 6,200 apartments, up 28 per cent quarter on quarter (QoQ) but down 6 per cent YoY.

Primary supply increased 5 per cent QoQ but decreased by 6 per cent YoY to 29,200 units. Grade B accounting for 74 per cent remained the largest supplier.

Increased developer and buyer confidence accelerated new project launches and second-quarter performance. There were about 5,400 sales, up 11 per cent QoQ but down 43 per cent YoY.

In the first six months of this year, the market had about 10,300 sales, down 47 per cent YoY with a 30 per cent absorption, decreasing 17 percentage points (ppts) YoY.

Pandemic effects made sales difficult in the first six months but average primary prices remained stable QoQ and moved up 7 per cent YoY to US$1,460 per sq.m.

Meanwhile, Savills saw HCM City market's primary stock in the first half of this year down 52 per cent YoY to over 9,100 apartments, to a five-year low.

The long Tet holiday followed by the pandemic has severely affected developer planning. Supply in the second quarter of this year from four new entries and 10 next phases totaling 2,100 units, plunged 55 per cent QoQ and 74 per cent YoY.

Seven planned launches have been postponed to the second half of this year. Sunshine Horizon launched limited stock pre-lockdown with an upgraded online approach. With foreign customers' lower demand and more cautious investors, Grade A and B launches each provided less than 100 units.

"The pandemic delayed new launches and slowed foreign investors. However, local demand remains steady, particularly for affordable units," said Nguyen Khanh Duy, Savills Residential Sales Director.

Sales in the first half of this year in HCM City fell 55 per cent YoY, to just over 6,800 units, the lowest in five years. Grade C performed best with up to 84 per cent absorption while contributing 64 per cent of all sales in the first half of this year.

The three new Grade C projects each achieved over 80 per cent absorption. Overall demand was positive with 75 per cent absorption slightly easing 4 ppts YoY.


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